Member Info for NoEasy

It's steps.

At the moment we have a fully funded drill, rig contracted and spud early November. We also have circa $7m in cash. We don't have the oil to sell. At this stage we have an 86% CoS of going into production.

By the middle of December we should given the 95% CoS have oil in the ground of sufficient quality/quantity to produce 20,000bopd. At this stage the CoS of going into production rises to 90.25%.

We will then attain finance to produce the oil. At this stage the CoS of going into production is 95%.

Legally binding contracts are then signed for the vessels to store the oil/production unit etc. Now we are 100% going into production.

The key point is that some investors see needing the finance to move things forward as a negative. If securing that finance also involves equity being issued then more so. But in this case, as opposed to say an explorer raising funds for an exploration drill or a nefarious CEO who raises funds but doesn't seem to get anywhere with those funds we know that the money is definitively going to make significantly more money. We will have reached the point whereby there is no debate on that outcome (barring oil going below $35.

Finance obtained in our expected near term circumstances is not a negative but value enhancing. I'm looking forward to the day when finance (debt plus equity) is announced.

'.......the placing was carried out over 5 months back so don't tell me that is holding us back...'

It's a big assumption to believe we've had 5 months of the placing investors selling. It's worth understanding the daily volume and when the SP moved back up to the placing price (I would assume that the vast majority of those investments weren't sold below the placing price!). Still scope for some placing holdings being sold.

Bladey /ST spot on. If we don't work out here I'll be shaking my head (snipers nightmare) for the short/medium/long term.

'I have seen ZAk charting mostly gets it wrong imo '

Yep but we've got Bladey doing our charting:-))

Normally I would agree MediMan but this one is giving me something to think about. De-risking before spud is sensible because the fear is the drill is a duster or has oil but not of a scale that is commercially viable. So with a 95% CoS of hitting oil and 86% CoS of this going to production already on the table (and its worth looking at how they arrive at that 86%) how much de-risking needs to be taken. I think the decision is not going to be based upon the likely result but upon guessing what other investors are likely to do.

A drop on spud seems very likely to be over-ridden 35 days later with a positive result.

You're taking a pretty myopic view there Oiler87 if you don't mind me saying so. One week ago we were on a low of 2.915. Seven days later we are now on a low of circa 3.4115. The trend is apparent.

And Carnarvon were up 7.41% overnight in Aus so reality starting to bite over there as well.

The fact that Carnarvon, who are our JV partner at Buffalo 10, have put it on record that they are seeking to accelerate development is a clear sign as to what is very likely to happen. They have considerable cash funds at their disposal, $98m and no debt, and have also gone on record as saying this drill will be transformational to them (as a $438m Mcap company). They are not only in a position to fast track production they have no reason not to and every reason why they should.

'In a phased approach that can only mean bringing that on at the earliest opportunity ....'

Apologies for the typo....distracted.

@patch, the phased approach could be very influential on our holdings. We know the first drill undertaken by the soon to arrive Valaris 107 rig (its doing a great job at our neighbours JSE at the moment) will be initially suspended and used as a production well. In a phased approach. That can only mean bringing that on at the earliest opportunity perhaps before any other of the planned drills go down. The impact at todays oil prices should increase revenue from one production well by 50% compared to the $50 barrel rate on which the CPR was based i.e. 4000 bopd would equate fiscal wise to 6000bopd.

This phased approach may require less initial funding for development (logic would say that with less drills that should be the case) and the revenue from the producing well could be used to partly finance additional wells. Any reduction in development costs in terms of debt/equity will have a positive effect for investors.

My calcs of three weeks ago had today as the day I expected to see the placing shares all but come to an end so I'm not gonna argue with SundayRoast's thinking.

Watching NZ V SA rugby on catch up, its half time so I thought I would pop in. Its right that you get recognition for your charting work Bladey, as I've said before you've nailed movement almost to the minute. I get that its just a tool amongst other tools/signals/fundamentals but often having the right variation of tools are the making of the job. Thanks for your posts.

Now just have to wait for half time to finish;-)

The CEO gave an interview 11 months ago so might be worth checking in to see how he is doing.

"What kind of deals are Advance looking for?"

1. We are non-operated

2. We are only interested in what is discovered

3.We don't do exploration

4. We are interested in being non-operated with two-party joint ventures

5. In terms of location we are Eastern Hemisphere excluding Russia, China and Iran.

6. "We are not looking for small assets or difficult assets that are being rehabilitated, we want to get something that's going to do for us net 20,000 bopd or 10,000 bopd, assets of some magnitude in the not too distant future."

7. "We have a specific niche we are looking for, which is our strategy, and that combined with our experience tells us that in our view we will deliver substantial value once we get traction”.

8. “We are specifically looking for assets which provide cashflow so we don't have to come back to the market and keep asking for funds to keep going.”

https://www.lse.co.uk/media/advance-energy-adv-are-actively-tracking-oil-and-gas-deals-expect-an-announcement-within-months.html

Nearly one year on and about to spud a fully funded appraisal well with a 95% chance of success for oil and an 86% chance of success that it goes to production for 20,000bopd net to ADV.

So Points 1-6 Achieved.
Points 7-8 Incoming.

'..permission to drill'.

It's a good question Lowboy.

The contract for the drill has been signed, that should tell us all we need to know regarding the permission to.

Additionally everything of value has already been agreed with the Government including fiscal arrangements which means there is very little if anything to be gained from not permitting the drill.

'Following the signing of the Treaty, Carnarvon commenced extensive negotiations to secure a Production Sharing Contract (“PSC”) with the governments of Timor-Leste and Australia, and in consultation with the respective government regulators, Autoridade Nacional do Petróleo e Minerais (“ANPM”) and Noational Offshore Petroleum Titles Administrator (“NOPTA”).The Treaty between Australia and Timor-Leste was ratified in August 2019 which finalised the maritime boundary change. Immediately following the ratification, Carnarvon signed a PSC confirming ongoing title to the Buffalo oil field and the surrounding exploration acreage.One of the key conditions of the Treaty was that the affected parties, such as Carnarvon, would be granted security of title with conditions equivalent to those previously in place under Australian domestic law. Importantly, Carnarvon’s PSC achieves a similar net back after government taxes and duties to Carnarvon, when compared to Australia’s offshore PRRT regime.Carnarvon also received formal recognition for previous work undertaken whilst WA-523-P was under the Australian regulatory regime. In particular, the approval of the Environmental Plan to drill three wells into the Buffalo field by NOPSEMA was accepted by Timor-Leste authorities and will continue to be utilised in the project.'
https://ar2020.carnarvon.com.au/projects/buffalo-project/

Carnarvon/ADV from their missives have essentially informed the market that they are at this early stage committing time and resources to expedite production. In essence they have risk assessed and see the value of spending money now. We are running both the 100m and a marathon.

Agreed SF. Everywhere you read it talks of majors divesting some of their interests so there is/is going to be excellent opportunities for the right companies with the right people with the right connections. Which is where this bit from the 15.10 post comes into its own; '.....the company will continue to utilize its experience and relationships to add new assets.....'.

The strategy is simple which is what appealed to me because it's not just a hopeful strategy based upon whether exploration is going to be successful, they are kicking it off with a realistic and significant money earner/leverage project for rapid expansion.

@SF, I don't see shareholder returns being for some time. They are looking to rapidly expand into a mid-tier, once they get there then that option for me becomes more likely. Like you I am happy to see the SP appreciate as each success/new JV is achieved.

Buffalo is the engine.

Funds - 8 weeks before they have a result here that they can leverage to high heaven, that would be a shame (I'm being polite!)

Pretty certain things will be a lot easier for them come December. We know they've got two projects ready in the background plus another two simmering what would be the rush to get in before the results are known? Plus this from Tennyson, '

'Once onstream, the Buffalo project generates substantial levels of free cash flow (187m net to ADV, at US$60/bbl during the first full year of production). This provides optionality with respect to the redeployment of capital. We expect an element of shareholder returns, however the company will continue to utilize its experience and relationships to add new assets to the portfolio and redeploy capital.

In terms of timing of new assets, we understand that the company is looking at assets which can be brought into the portfolio in the near term with no upfront consideration (i.e. no dilution for equity holders). We wouldn’t expect any larger transaction – for example one requiring additional equity funding – to be considered at least until the results are known from Buffalo-10.'
https://www.advanceplc.com/media/1081/210420_recipe-for-success-2.pdf

The wider market issues seem to have been rowed back overnight so I've done the same Rhum, just shy of 600k bought.

'85% probability of confirming a sanctionable development project'

The interesting bit is that to get to that 85% figure involves an even higher percentage of things happening.

1.Development is expected to proceed after appraisal provided the appraisal outcome is not worse than 1C (~95%)

2. Acceptable commercial arrangements can be secured with facility (FPSO, MOPU, FSO) owners (95%)

3. ADV & Carnarvon (joint venture partners) can secure development funding (95%).

RISC estimate the probability of development to be 86%
(95%x95%x95% = 85.73%).
https://www.advanceplc.com/media/1092/risc-cpr-buffalo-23mar2021b.pdf